Avoid Sale Sabotage by Setting Your Home’s Price Right

Tom Burns knew it was time to sell his parents’ Wyandotte home this fall. His dad had passed on years ago, and mom had moved to Oregon to live with his sister.

So when his Realtor suggested that he put the three-bedroom, 1 1/2-bath home with 1,400 square feet on the market for $79,500 last month, that’s just what he did. And 18 days later, he had an offer for $75,000 that he accepted. The closing is coming up.

“We wanted a price that would move it quick without giving it away,” said Burns, 54, of Plymouth, who works as a cost analyst at Ford.

It has never been more difficult or critical to set the right price on your home when marketing it for sale. Too high and it might not get offers or showings. Too low and it might spark a bidding war, but still end up netting less than you need to pay off your mortgage.

Home prices started stabilizing in metro Detroit earlier this year, said Alex Villacorta, director of research for Clear Capital, a Truckee, Calif.-based real estate valuation firm. After losing nearly 80% of value in the housing slump, prices have rebounded about 15% from early 2009, he said.

“It isn’t like it is back to peak levels or anything like that, but that it is starting to go back up is encouraging news for the market,” Villacorta said.

But keeping prices from a full recovery now is the steady stream of foreclosures, he said.

And some sellers are paying the price for not setting the right price as their home sits on the market.

Andy Hargreaves, a Realtor with Coldwell Banker Preferred in Plymouth, said he has a client who won’t take less than $180,000 for his West Bloomfield colonial. It has four bedrooms, 2 1/2 bathrooms, 2,386 square feet and a walkout basement. Hargreaves is the man’s fourth agent, and the house has been on the market for 806 days.

The home has been shown to hundreds of potential buyers, but it was overpriced for the market, he said. “There’s no way the home would appraise now at his price, but he wants to sell it for his asking price and not a penny less.”

So what should you consider when setting the price for your house? We polled some local Realtors, and here are their top tips for a quick sale:

• Listen to your agent. “I have many, many people who think they are armchair quarterbacks, if you will. They think they know how to do our job when this is what we do all day, every day. If we make a suggestion, don’t take it personally,” Hargreaves said.

Agents look primarily at sales in the area of homes that are comparable to yours in size, features and location when setting a price. But they also take into account how the house might appraise as part of the mortgage application.

• Don’t overprice it. “As inventories get low, some people think they can set the price a little higher,” said Mark Monaghan, broker/owner of Sine & Monaghan Realtors Real Living in Grosse Pointe Farms. “The bad news is you are still compared to the last three sales in your neighborhood, and if they were distressed sales that affects you.”

The condition of the home also makes a big difference with buyers now, he said. Some clients in Grosse Pointe Farms spent three months getting their house in good condition to sell. After the work was done, they marketed the 1,800-square-foot Colonial for $189,000 and received an offer close to that within 10 days on the market, he said. “The better the condition is, the better the price is.”

• Go at or below market. “Home prices are as cheap as cars. It is the price that is bringing them in,” said Joy Santiago, broker/owner of Dwellings Unlimited in Farmington Hills. “You do not want to do what they call chase the market. If you set your price above the market, no one is going to look at your property because they are looking at the lower-priced homes.”

Santiago said she had one client who listed a home four years ago in Detroit for $209,900 because that’s where the comparable sales were at the time. But no one knew in 2007 how far down the market would go. The client chased the market down in small increments to $99,000, and recently got a $50,000 short sale offer. The sellers had several offers, but the house could not appraise for the offer price as the market continued to fall.

• Don’t test the market. “I don’t list a house for more than it is worth. I don’t want to waste my time and buyers are very educated. They know the right price,” said Mike Bahry, a Realtor with Re/Max Vision in Huntington Woods.

He advises clients not to test the market as was typically done in a normal market. Sellers would overprice a little to see how the market responded. Now, Bahry says more agents are putting low prices on homes to elicit bidding wars and discourage low-ball offers.

“The market is very hot for the short sales and foreclosures in good shape. But the market for the private homes is not moving unless they are giving it away,” he said.

As an example, Bahry said he sold a 1,916-square-foot, three-bedroom, two-bathroom home in Farmington Hills after one day on the market.

The house, listed for $144,900 in a short sale, drew 16 bidders and sold for $160,000 this summer.